Practical options pricing for better-informed investment decisions.
The Heston Model and Its Extensions in VBA is the definitive guide to options pricing using two of the derivatives industry’s most powerful modeling tools—the Heston model, and VBA. Light on theory, this extremely useful reference focuses on implementation, and can help investors more efficiently—and accurately—exploit market information to better inform investment decisions. Coverage includes a description of the Heston model, with specific emphasis on equity options pricing and variance modeling, The book focuses not only on the original Heston model, but also on the many enhancements and refinements that have been applied to the model, including methods that use the Fourier transform, numerical integration schemes, simulation, methods for pricing American options, and much more. The companion website offers pricing code in VBA that resides in an extensive set of Excel spreadsheets.
The Heston model is the derivatives industry’s most popular stochastic volatility model for pricing equity derivatives. This book provides complete guidance toward the successful implementation of this valuable model using the industry’s ubiquitous financial modeling software, giving users the understanding—and VBA code—they need to produce option prices that are more accurate, and volatility surfaces that more closely reflect market conditions.
Derivatives pricing is often the hinge on which profit is made or lost in financial institutions, making accuracy of utmost importance. This book will help risk managers, traders, portfolio managers, quants, academics and other professionals better understand the Heston model and its extensions, in a writing style that is clear, concise, transparent and easy to understand. For better pricing accuracy, The Heston Model and Its Extensions in VBA is a crucial resource for producing more accurate model outputs such as prices, hedge ratios, volatilities, and graphs.
Praise for The Heston Model and Its Extensions in VBA
“In his excellent new book, Fabrice Rouah provides a careful presentation of all aspects of the Heston model, with a strong emphasis on getting the model up and running in practice. This highly practical and useful book is recommended for anyone working with stochastic volatility models.”
Leif B. G. Andersen, Bank of America Merrill Lynch
“Without a doubt, Fabrice provides a very valuable contribution to quantitative analysts interested in pricing options with state-of-the art techniques.”
Marco Avellaneda, New York University
“The Heston model is one of the great success stories of academic finance. Rouah’s impressive book provides users with all the tools required to implement the Heston model, and wonderfully bridges the gap between academia and practice.”
Peter Christoffersen, University of Toronto
“In this encyclopedic work, the author takes delight in exploring every aspect of the Heston model. Together with its code, this book will prove invaluable to anyone interested in option pricing. I highly recommend it.”
Jim Gatheral, Baruch College, author of The Volatility Surface: A Practitioner’s Guide
“This is the most extensive work on the Heston model I have seen: derivations, implementations, and discussions. For anyone interested in the Heston model and its variations, this is an important book to have!”
Espen Gaarder Haug, Norwegian University of Life Sciences, author of Derivatives Models on Models
“Rouah offers a unique and much needed synthesis of the literature regarding Heston’s model of stochastic volatility. The author has accomplished the formidable task of presenting a large body of published academic and industrial research in a coherent, thorough, and very reader-friendly manner.”
Andrew Lesniewski, DTCC
“Beyond Black-Scholes, the Heston model is arguably the most important model in quantitative finance and certainly deserves its own book. Rouah provides here a comprehensive treatmentclearly discussing all the major issues, later extensions, and subtle traps.”
Alan L. Lewis, PhD, author of Option Valuation Under Stochastic Volatility: With Mathematica Code
FABRICE DOUGLAS ROUAH was a quantitative analyst who specialized in financial modeling of derivatives for pricing and risk management at Sapient Global Markets, a global consultancy. Prior to joining Sapient, Rouah worked at State Street Corporation and McGill University. He is the coauthor and/or coeditor of five books on hedge funds, commodity trading advisors, and option pricing. Rouah holds a PhD in finance and an MSc in statistics from McGill University, and a BSc in applied mathematics from Concordia University.